I stumbled upon Beatrice Gerard’s Hunting for Sparrows when looking for some light reading for the weekend. It’s a thriller, but it underlines two different philosophies of economic development. thebankruptcynewsdotcom

There is action and the rest, of course, and a good dose of, what shall I call it, eroticism, but what struck my attention was the debate between Supply Side Economics and, if not Keynesian, pre-Supply Side Economics.

At the core of the argument is whether you can make money in a market without consumers. I haven’t read any fiction books lately that attempted to discuss politics and economics in the context of entertainment (aside for the Stieg Larsson’s Millennium Trilogy, which is more interesting  if you are actually interested in Swedish politics).

I would say that, Hunting for Sparrows is about economics in the same way the Millennium Trilogy is about Swedish politics (I got really into it, but I am sure that’s just me). My wife is reading in and she insists I am a total nerd, and that it is about womanhood and sisterhood. What can I say, to each it’s own.

All in all, I found it a good discussion about how to sustain economic development and the risk of Supply Side Economics (that oh, so well we have started to appreciate after 30 years of glory), in the context of a fun to read thriller.

Since Thrillers and economics are normally separated (unless it’s a thriller about corporate corruption), I wonder if this is something new, or the beginning of a new phenomenon that is bringing to the forefront of the popular discussion themes that were normally reserved to specialized groups. I wouldn’t be surprised, taking into account the emergence of the Occupy Wall Street movement, which has brought forward many subjects that used to be limited to polite political conversation about the role of Wall Street in the development and destruction of capital.

Regardless of what happens with this wave of protests (winter can be a big deterrent for popular movements), the occupy movement, its continuation, spawns, and follow-up movements are here to stay. Washington has two illusions: that the movement wanes during the winter months and doesn’t come back, and that the 1012 elections offer a relief, or at least change the subject long enough.
Problem is, we are going through a global systemic crisis of the capitalist system, and it’s not going to go away with the next election, or during the winter. This crisis will last at least a decade. That’s a decade of high unemployment, cuts to social services and public education, a decade where Wall Street will try to discharge their loses in the backs of the American people.
Under that framework, electoral politics are just a farce. Politicians can yell until they are red in the face “more spending”, “more tax cuts”, but the American people (not yet the 99%, but the 75%) disapproves of the sad act that Congress is putting. That’s right, only some 25% of the American people feel represented by the current Congress (both parties), while they seem to be oblivious to that silent call for change. Focused on their needs of their constituencies as related to them by lobbyists, Congressman and women are playing a dangerous game of chicken. They expect something is going to change so they don’t have to. Problem is, they are playing this game against an unmovable wall.
Meanwhile, Occupy Wall Street will continue and will replicate under many names and with slightly different styles. At the core of this, and future movements, will be the same claim for a deeper form of democracy that listens to the needs of the American people, not to the highest paying bidder. thebankruptcynewsdotcom

A The Onion called Occupy Wall Street to define a position so everybody could move on and ignore them.
The old guard doesn’t get Occupy Wall Street. They still think in terms of “political movements” when Occupy Wall Street is a moral movement.
For too long, Morality (and I mean Morality, not chest-banging in the name of a cause) have been absent from Politics; when morality should be the basis of politics.
I call immoral the recent move by Bank of America to unload their risky bets unto the unsuspecting American people. (And yes, it’s the American People, not the “taxpayers”, let alone “consumers” as the mainstream press degrades our role in society.)
Different groups have tried to shape the discourse in different, and comfortable, directions. Some try to paint Occupy Wall Street as a group of losers looking for a hand-out. Well, if you think of them like that, what do you think about Wall Street? To me, they are the bigger losers, and the ones who got the bigger handout.
And when I talk about handouts, I am not talking about the bailout money. Any political or financial commentary that says “they paid back the bailout money” is ignorant at best, and disingenuous at worst. The bailout hasn’t stopped. The banks continue to receive loans at record-breaking low-interest without any obligation to pass that money stolen from the working people (by the way, I am not talking about overall-wearing people here, I am talking about anybody who does work before being paid) to the society under any circumstances.
Did I mention the monstrous transfer of risk from Bank of America to the American People (yes, the We at the beginning of the Declaration of Independence; We, the ones that should have a government of the people, by the people, for the people).
The immorality of Wall Street traders (and no, Ann Ryan wasn’t talking about them: they are the ones who grow government to receiver bigger handouts) that permeates American politics needs some “checks and balances”.
Occupy Wall Street may be, or not, short on checks, but they sure are the moral balance to the decline of this great country. thebankruptcynewsdotcom

Occupy Wall Street is being pressured to “make demands”, “offer solutions”. I contend this is not the role of a broad-based grassroots movement, that’s the role of the elected officials.
Occupy Wall Street has been very successful so far in becoming the “Lobbyist for the 99%”. Think of it as a lobbyist who brings home to the political establishment the issues of a fraction of the constituency.
In this case, rather than lobbying for the importance of a bridge, a regulation, careful attention to the needs of the pro-choice ducks of Africa, or the pro-life elephants of Madison, they are lobbying for the not less important issue of having a country you can call home, and having a future.
For far too long, the economic-political philosophy of our representatives focused on the needs of the 1%. The idea, the hope, was that the wealth would somehow trickle down and eventually create a tide that would lift all boats. Cute idea, so it is the idea of communism. Too bad the implementation sucks.
The reality of the implementation of the trickle down theory has been a complete failure to create even puddle of mud where our kids can have a sense of how it is to live with humidity on their feet.
The entire debate about big-government, small government; tax cuts or not, it’s flawed because it’s trying to patch a broken system instead of fixing it.
Maybe back in the 1980s it was necessary to create the huge derivatives market with live with now. Maybe it accomplished some good things, but it’s not working anymore. We live in an age of de-leveraging. More debt is not possible, more money out of thin-air is not sustainable, and trying to de-leverage on the backs of the 99% is not only corrupt and unjust, but plain dangerous.
It’s not the first time in history that lobbying happens in the streets. Indeed, when the elected officials embrace unjust philosophies for too long, the discussion about the issues happens on the streets.
It’s time for the legislative and executive to wake up and smell the effect of their failed philosophy. It’s time to start asking themselves hard questions, like: do we really want to keep a parasitic class of self-serving traders creating liquidity by leveraging more and more? Or we want to have them to start unwinding their positions and move the money into productive, not merely speculative, ventures?
There aren’t many ways to get out of this situation: it’s either more cuts to social services and further social divestment, inflation, or common sense American solutions like having capital invest in companies, and not in speculation.
The Lobbyist of the 99%, is not going to give the answer, but sure it’s going to keep reminding our government that you have to start rebuilding industrial, not financial, America. thebankruptcynewsdotcom

President Obama said today that the OWS shouldn’t demonize the people working at Wall Street. I would agree in general with that, but I suspect that OWS is not against the clerks, analysts, etc. who work in Wall Street, but rather against those who don’t work. Not only those who don’t work, but those who do nothing productive. A speculative elite that creates increasingly complex derivatives that serve no financial purpose other than enrich them gambling with the destiny of real companies, real producers, who create actual jobs.
There is a class of parasites in Wall Street that does nothing to allocate capital to worthy enterprises, that rob companies from money that could be invested in improvements, R&D, riskier ventures. A class whose sole benefit comes from gambling.
These Wall Street guys don’t work, don’t do anything productive, and demand from companies almost impossible to achieve profit margins. These continuous and voracious demand forces companies to ship jobs overseas, reduces the economic base and the acquisitive power of the people who actually work, on and off Wall Street.
OWS is a wide movement that keeps, and should keep, the discourse alive and call attention to this parasitic class that is eating away the wealth of the nations. As such, they shouldn’t be asking for specific reforms. In a representative democracy that is the role of the representatives in congress and in the executive.
The Dodd-Frank Wall Street Reform and Consumer Protection Act, took timid steps towards reducing the amount of speculation in certain areas, but it hasn’t gone nearly far enough.
Have you seen big tanks of oil in Wall Street ready to take delivery of the billions in futures contracts held by Wall Street firms? Me neither.
A simple rule like “hey, if you buy oil futures, you have to take delivery” would force Wall Street firms to unwind their long positions in oil that would remove from the market the fake demand created by these guys who have no intention to ever getting near any oil.
The price of oil would plummet to levels that are conducive to a more vibrant economy. And yes, a few yuppies would be poorer, but millions would be happier.
No new taxes are needed, no redistribution of wealth from “heroic producers” to “evil consumers”, just a simple rule that says “you can buy and you can sell, but you can’t speculate for speculation’s sake”.
This is not, and should not be, an OWS concrete proposal, but it’s one that the 99% of the American people can get behind. And it’s just the beginning.
There is a ghost walking around Wall Street, and it is the ghost of productive America killed by a parasitic class of speculators. thebankruptcynewsdotcom

Tags: America, Democracy, Occupy Wall Street, ows democracy, redistribution

This is an update to a post published almost two years ago: Some Historical Perspective on the Current Recession.Back then I analyzed data until the third quarter of 2008. The data showed that we weren’t in a depression yet, and that Up to the 3rd quarter of 2008, the economic recession was shallower than the 2001 recession. thebankruptcynewsdotcom

The revised data for the same period shows that in the 4th quarter of 2007 we were in a shallow depression that double dipped in the 2nd quarter of 2008 to bottom in the 4th quarter.

Make no mistakes, from the point of view of American corporations we hit a depression, a situation in which the undistributed corporate profits as percentage of GDP are negative which we had not seen since 1929.

Undistributed corporate profits as percentage of GDP

We exited the situation with a sharp V shaped recovery, and American corporations went into positive territory in the 2nd quarter of 2009 . There is a lot that still needs to be done, and in job front the recovery is not being reflected, that’s going to take time, and many types of jobs will not come back in the same numbers than before the depression.

In 2007, I wrote that we were in a recession, and the Republican pundits criticized my assertion based on the methodology of the analysis. Today, they will say that we are not in a recovery, and they will be wrong once again.

If you don’t care much about checking the previous posts, let me show you that the speed of this recovery blows away the recovery from the 2002 recession.

The stimulus packages have worked, they removed us from a depression on a steep v shaped recovery, the economy is coming back in full swing, and next year we will start seeing the effects on the areas were count: jobs and improved quality of life.

Here it is, yet, another explainer. There is nothing to see folks. Gold was overextended and it entered a correction period. These corrections can go from 33% (in the March-October period of 2008) to 9%.

The garden variety is a 13% correction from top to bottom.

The current correction will find strong resistance at the 50 SMA which would put it among the group of soft corrections at 7.5%. If gold failed to bounce at the 50 SMA the next level of support is down 8% from here. Yup. You guessed right, another 13% correction.

Every single trend from the 10 day to the 500 day is up in gold, and both Positive Volume Index and Negative Volume Index indicators point to great crowd enthusiasm in buying gold.

As you may know, I consider gold as just another trade instrument, and careful following of the market may make the difference between making money and ruin. In this vein, I don’t believe in investing exclusively in physical gold as the buy-sell spread can take easily away a good chunk of your profits if there are no willing buyers.

Back in 2008 I wrote that I expected this up move in gold (The Case for Gold as the Next Bubble Instrument (and How to Play it Safe)) and since I wrote that article gold moved up 37% (not without first correcting down 26%).

Back in January of 2008 I said that “2008 [was] going to be a flush year (they will try to make us sell our houses for cheap, our stock for cheap, etc.).” And it was indeed, I don’t expect right now a similar correction in the gold market.

If gold bounces at the 50 SMA, the next upswing will be of around 12%, if it bounces after a 13% correction, the next upswing will be of around 22%. I am in no rush to buy at this point as we may even face an evil correction of 20% with strong support at 1,000. I will be checking where the bounce seems to be confirmed and I may be adding to my position then.

In the meantime, enjoy the chatter and the vagrancies of the golden market.

Update on May 27

Gold bounced but it may be a fake. I am on the fence for now. I was waiting for a more meaningful bounce, and this is not it. I would like to see one more leg down and a bounce before adding to my position.

Tags: bubble economy, crowd dynamics, Finance, Financial Planning, gold, gold traders, investing in the stock market, investment opportunities, speculative bubble

I haven’t written in the longest time. My last post, I see, was back in November. What could, you would ask, force an able-body-human-being-who-enjoys-sharing-his-unwanted-opinions-with-strangers (that’s my real name) to stay away from writing and almost forget the password of the blogsite? thebankruptcynewsdotcom

The answer my friends, is blowing in the increase in productivity numbers. You see, productivity numbers are misleading by themselves. In times of technological change and advance, the core increase of productivity may be related to improvements on the amount of products the same worker can produce at the same time. This, although increases the plus-value extracted to the worker and (in theoretical Marxist terms would increase the exploitation of the worker) in practice may translate in benefits for both worker and entrepreneur (particularly if you have some form of profit sharing in place, like during the early times of the software industry or the German economy).

However, when technological advances are stagnant, the only way to increase productivity is to increase direct exploitation of the work force. This direct exploitation would be in the form of slave salaries (off-shoring labor cost to third world countries) or by increasing the work hours of the existing labor force by threat of starvation.

High unemployment hangs by a thread a rock over every worker’s head. High unemployment doesn’t affect only those unemployed or underemployed, but it sends a message across society: “Beware, you could be next”.

When your business friends and partners are falling, when rational investment opportunities dwindle, and when the ghost of unemployment comes close home, you tend to fall for the trap. You head the threat and you work harder, lowering your salary in relative terms without need for any explicit request: The net result, an increase in productivity.

This increase in productivity, however, is just an illusion. There is only so much water you can extract from rocks. When increases in productivity comes on the back of real exploitation of the workforce, or by means of ever decreasing salaries by moving production to more impoverished countries (is Haiti the next China, or just the next Jamaica?) you know you are not facing a real increase in productivity. You are facing an overproduction crisis.

As you can see, both my personal destiny (as part of the workforce on high tech on the most powerful country on earth) and the destiny of every worker affected by globalization are the same. I am immensely richer than them, I am extremely more comfortable than them, and I have more liberty, but all those things hang by the same thin thread of the first global overproduction crisis.

Related articles

• Productivity rises more than expected in Q4 (seattletimes.nwsource.com)
• Productivity up, employment down: Is squeezing workers good for America? (dailyfinance.com)
• U.S. Wage Growth: The Downward Spiral (yzerfonteinchronicles.blogspot.com)

If you are honestly against subsidized health care, I want to ask you that starting tomorrow, and for consistency sake, you stop using the list of products listed below. You see, this is not an all encompassing list, it’s just the beginning of the list of products that you should be worried about.
What’s the list? Why should you stop using them, you ask?
This list is a general list of Products that use Corn. Corn is one more of the evils of big government. Corn Subsidies in United States totaled $56.2 billion from 1995-2006.
Much as you malign subsidized health care, you should be against government intervention in our food supply trough corn subsides! thebankruptcynewsdotcom

Do it for our children! Do it for our grand-children. Stop now the out of control spending of the government.

Show your true patriotic colors and stop using:

Adhesives (glues, pastes, mucilages, gums, etc.)
Aluminum
Antibiotics (penicillin)
Asbestos insulation
Aspirin
Automobiles (everything on wheels)
xxx- cylinder heads
xxx- ethanol – fuel & windshield washer fluid
xxx- spark plugs
xxx- synthetic rubber finishes
xxx- tires
Baby food
Batteries, dry cell
Beer
Breakfast cereals
Candies
Canned vegetables
Carbonated beverages
Cheese spreads
Chewing gum
Chocolate products
Coatings on wood, paper & metal
Colour carrier in paper & textile, printing
Corn chips
Corn meal
Cosmetics
C.M.A. (calcium magnesium acetate)
Crayon and chalk
Degradable plastics
Dessert powders
Dextrose (intravenous solutions, icing sugar)
Disposable diapers
Dyes
Edible oil
Ethyl and butyl alcohol
Explosives – firecrackers
Finished leather
Flour & grits

Frozen foods
Fructose
Fuel ethanol
Gypsum wallboard
Ink for stamping prices in stores
Insecticides
Instant coffee & tea
Insulation, fibreglass
James, jellies and preserves
Ketchup
Latex paint
Leather tanning
Licorice
Livestock feed
Malted products
Margarine
Mayonnaise
Mustard, prepared
Paper board, (corrugating, laminating, cardboard)
Paper manufacturing
Paper plates & Cups
Peanut butter
Pharmaceuticals – The Life Line of The Hospital
Potato chips
Rugs, carpets
Salad dressings
Shaving cream & lotions
Shoe polish
Soaps and cleaners
Soft drinks
Starch & glucose (over 40 types)
Syrup
Tacos, tortillas
Textiles
Toothpaste
Wallpaper
Wheat bread
Whiskey
Yogurts

Just taking quick notes related to the health care debate. I find that most of the assumptions of those opposing health care reform are misinformed at best and disingenuous at worst. I am not talking about honest common folk who formed an opinion based on incorrect information, I am talking about those feeding the incorrect information. thebankruptcynewsdotcom

To make this apolitical and objective I’ve chosen data from 1980 to 2008, that encompasses both Republican and Democratic administrations.

What I did here was to analyze the official Price Indexes for Gross Domestic Product to detect which indexes grew the most between 1980 and 2008. That will provide us with a measure of inflationary factors and deflationary factors (i.e., which sectors of the economy grew faster, which of them shrank).

I don’t care here about the reasons for the growth or shrinkage, only about the numbers.

To give a clear example so it’s easier to understand, the main deflationary sector (the one the shrank the most) is Computers and peripheral equipment. If you remember, back in 1980 computers were very expensive and today they are relatively cheap. The amount of money we spend in computers therefore is less today than it was in 1980. The growth factor of computers is -5060.4.

So, now to the numbers:
And the winner is (roll drums). No. Not health care, but Gasoline and other energy goods, with a growth factor of 94.65.
Non residential structures follow with a GF of 87.79 and Health care follows third, with a growth factor of 83.71.

So basically, over the past 28 years the 3 main inflationary forces are Gas, Commercial Real State and Health Care.

If we discount the Oil price bubble and the Real State bubble, the main inflationary force is Health Care.

Now, for the big bad government. Where it ranks? In a sad 20 place (and that’s with 2 wars, national security overhaul and the 2008 bailout), 10 places below Financial services and insurance.

For those worried about the government putting their hands in your pockets, I must tell you that you have been taken by one of the oldest methods in pickpocketing: Distracting your attention to the wrong pocket.

Now, here is my question to those who think that the problem is big government.
If they think that Taxes are outrageous why aren’t they 20% more outraged about the Health Care industry? Because that’s how much more the Health Care Industry took from us than the Government. And actually, that’s not even true, because (as our national deficit shows) the government did not even take money from us.
Even if big bad government increased taxes by 20% tomorrow they would be just even with the Health Care Industry.